Market pressure mounting on gun makers, sellers

Ruger, S&W shares slump; retailers pull some guns from shelves

By

WilliamSpain

CHICAGO (MarketWatch) — The firearms business is coming under mounting market pressure as calls for new restrictions on gun ownership following last week’s school slaughter drove down shares of two major players and led some retailers to begin pulling specific products from shelves.

Rifle in crosshair of guns debate

(2:26)

The AR-15, one of the most popular rifles in America, is under scrutiny after police say the weapon was used in the massacre in Newtown, Conn. (Image: Getty)

After largely avoiding the issue during his first term and the recent election season, President Barack Obama has indicated he may push for some policy changes. Among those would be a reinstatement of a previous bar on the sale of so-called assault weapons and a ban on high-capacity magazines.

Any meaningful new rules would have to get through the Republican-controlled House of Representatives and pass scrutiny before the federal courts, which in recent years have expanded the rights of Americans to keep and bear arms.

Previous mass shootings have led to few if any changes in existing gun laws, of which there are some 20,000 on the books at the federal, state and local levels. But the sheer horror of the latest event in Newtown, Conn., apparently has driven even some historically pro-gun legislators to shift their positions.

Last Friday, after murdering his mother, 20-year-old Adam Lanza shot up Sandy Hook Elemengtary School in Newtown, leaving 26 people — most of them young children — dead. He then turned a weapon on himself.

Police found two handguns — a Sig Sauer and a Glock, both manufactured by European firms — as well as an American-made Bushmaster AR-15 semiautomatic rifle, which apparently was used in most of the slayings.

It may well be that the latter is the first casualty of the ensuing fallout. On Tuesday, Cerberus Capital Management said that it would sell its stake in Freedom Group, which makes the Bushmaster, along with Remington, Marlin and other brands.

In a statement on its website, Cerberus said that while “it is not our role to take positions, or attempt to shape or influence the gun-control policy debate,” there are actions the firm can take, including selling its holdings in Madison, N.C.-based Freedom Group.

“We believe that this decision allows us to meet our obligations to the investors whose interests we are entrusted to protect without being drawn into the national debate that is more properly pursued by those with the formal charter and public responsibility to do so,” Cerberus added.

The firm already had tried to cash out of Freedom Group with an ill-fated IPO that was announced in 2009 but eventually was canceled last year.

Meanwhile, some retailers have moved to limit the sales of certain guns in the wake of the tragedy. Dick’s Sporting Goods Inc.
DKS, +1.15%
one of the largest gun outlets in the United States, said that it has removed all guns from its store nearest the school and “suspended the sale of modern sporting rifles in all of our stores chainwide.”

The company said it was acting “out of respect for the victims and their families during this time of national mourning.”

Reuters

The Shooter Shop in West Allis, Wis.

Rival Cabela’s Inc.
CAB, -1.31%
has made no formal statement and did not return calls seeking comment.

According to media reports, Wal-Mart Stores Inc.
WMT, -0.25%
also has stopped selling the Bushmaster semiautomatic.

Publicly traded gun makers took the real beating, even as none of the companies’ firearms were involved in the latest school shooting. After two days of sharp declines, shares of Smith & Wesson Holding Corp.
SWHC, +0.93%
and Sturm Ruger & Co.
RGR, -0.22%
managed to rebound slightly Wednesday.

However, both companies have seen significant run-ups over the last four years as sales boomed in the wake Obama’s 2008 election and subsequent re-election, with Americans snapping up guns and ammunition in record numbers.

Ammunition maker Olin Corp.
OLN, -0.13%
a diversified firm with many other interests, was off 2% at $21.08.

The firearms industry has been relatively quiet in Newtown’s immediate aftermath. The National Shooting Sports Foundation, the leading trade association, said it was “deeply shaken and saddened by the horrible events” that took place. The group’s headquarters is actually in Newtown.

The NSSF declined further comment “out of respect for the families, the community and the ongoing police investigation.”

For its part, the National Rifle Association of America, the lobbying group based in Washington, said it was “shocked, saddened and heartbroken” and that it will give time “for mourning, prayer and a full investigation of the facts before commenting.”

The NRA also said it would “offer meaningful contributions to help make sure this never happens again” and plans to hold a news conference on Friday on the shooting.

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